When news of a potential alternative buyer surfaced the stock jumped a bit, but it sure seems that the market doesn’t believe it will succeed in finding another purchaser. That being said, getting sucked into the global sell-off of last week, ECI stock is trading in the $9.35 range, about $0.50 less than it was trading just two weeks ago. Either the market doesn’t believe the Swarth deal is going to go through either, or there is a nice trade that would yield over 6.5% net until the deal closes.
The company announced an extraordinary general meeting of shareholders for August 29, where, among other issues, a vote on the merger will take place. I haven’t heard any information to indicate the acquisition won’t be approved. In fact after speaking with some merger arbitrage hedge funds who see this opportunity, this seems like a “no brainer.”
I think that currently, the market is mis-pricing ECI, and if you are looking for an interesting bet until the end of the year, this is a good opportunity.
Disclosure: The author’s fund is long ECIL as of July 30, 2007.
ECIL 1-yr chart: